Sefalana Holding Company’s stock price took a huge hit on Thursday, adding to other steep drops in the stock price experienced over a period of two weeks. Shares of Sefalana have plummeted by 15.46% in the first month of the year’s trading, falling to P10.99.
The precipitous drop in the group’s stock price makes it the worst performing stock in the Botswana Stock Exchange listed companies. Combined with 5.8% losses in the previous year, the stock is under pressure from investors who are used to the stock’s good returns last seen in 2015 when it grew by almost 50%. However in recent times, Sefalana’s performance in the stock market reflects a broader trend in the Retail and Wholesaling sector of the BSE.
The sector has been under pressure due to tough trading conditions characterised by diminishing spending power, weak economic growth, retrenchments, rising unemployment and intense competition. The sector declined by 7.1% in 2016, a drastic contrast to the 4.2% growth in 2015. The losses from 2016 in the sector seem to have extended to 2017: Sechaba Breweries is down by 11.14% and Choppies has lost 0.83%.
Through the four decades of operating, Sefalana Group has grown into a large and diverse business, operating in a number of sectors including 67 stores in the Fast Moving Consumer Goods (FMCG) sector within Botswana and Namibia. Whilst its core business is in the FMCG sector, the Group remains well diversified with a solid property portfolio in Botswana, Zambia and Namibia, 3 motor dealerships (MAN, TATA and Honda), agencies for the sale of industrial and agricultural equipment, a well-established grain mill in Serowe, providing nutritious meals for the country’s population and a UHT milk plant, which commenced operations this year. Group remains the only listed company without a controlling shareholder. The single largest shareholder is Botswana Public Officers Pension Fund at 42.85%. Citizens hold a total of 91.87% of all issued shares.
Late last year, Sefalana undertook a Rights Issue program when the board issued an additional 27,858,523 new shares thus increasing stated capital comprising of ordinary shares from 222,868,186 shares to 250,726,709 shares. The additional shares were offered to existing shareholders in a ratio of 1 Offer Share for every 8 shares held by shareholders at a price of P12.60 per offer share, representing a 10% discount to the Sefalana share price at the time.
The rights issue was able to raise P351 million. The trailblazing group said the capital will be used to finance the acquisition of the Lesotho Business (TFS), to make an investment in a South Africa Consortium, to assist with future acquisition opportunities, to fund property acquisitions relating to these Transactions, and for other working capital requirements of the Sefalana Group.
In the latest interim financial results released a week ago, Chandra Chauhan, the group Managing Director, says in the face of continued strain on the economic climate in Botswana, following the closure of a number of institutions that has led to an increase in unemployment across the country, Sefalana has had to remain competitive and weather the storm of lower consumer spending.
“Some of our business units in Botswana have generated a lower level of profitability than in the previous year as a result of increased pressure on margins as we attempt to provide our customers with the best possible price in these difficult times. Government spending in some areas has also declined and this has adversely impacted those businesses that are reliant on recurring tenders.” He added that fortunately for the group as a whole, the Namibian business has grown sufficiently to offset the decline experienced locally.
The Group’s overall profit before tax for the 6 months ended 31 October 2016 of P81.1 million was marginally up on the comparative period ended 31 October 2015 at P80.4 million. The group managed to reach the P2 billion threshold in terms of turnover for the current six month period – a long standing target for the group. The overall total comprehensive income for the period is significantly up on the comparative period at P60.1 million compared to P18.5 million at October 2015.
Other financial highlights for the 6 months to 31 October 2016, show that the group’s revenue was P2.0 billion – up 9% on prior period; Gross profit was P152 million – up 4% on prior period; Earnings before interest, tax and amortization (EBITA) was P82.2 million, up 4% on prior period; and Profit before tax was P81.1m – marginally up on the prior period.
In efforts to lure customers amid a challenging trading environment marked by job losses and tight competition, Sefalana launched an online shopping portal and loyalty rewards programme. The group says the customer loyalty scheme, Sefalana Rewards, has received tremendous response from customers as they managed to sign up 100,000 customers in a space of six weeks. The group further said that through this initiative and through the rebranding program, they have seen an increased level of loyalty and support from their customers.
“ This product allows customers to earn “Sefbacks’’ on all purchases through giving back a percentage of the purchase value to our customer in the form of points that can be redeemed for cash at any time. This also enables us to understand and monitor our customer behaviour better, and to offer them specific products and promotions that will be of interest, whilst at the same time giving something back every time they shop with us,” the company explained.
Sefalana says a year after they became the first local retailer to launch online shopping, they have enhanced their online store offering, providing a refreshed look and feel for customers, with larger product displays, easier navigation and additional methods of payment. The group is planning are to roll this out to the Francistown area during 2017.
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.